When selling a property in New South Wales at what point is the sale legally binding?
Once a vendor reaches an agreement with a purchaser they have what is known as “offer and acceptance.” At this point neither party is legally bound and both parties are free to walk away from the deal without penalty.
Your real estate agent will at this point send a sales advice to both lawyers advising the full names of both parties and the main terms of the deal including the sale price, deposit and settlement period. Both parties are still free to walk away.
The lawyers will then finalise all of the terms and conditions of the contract for sale and your lawyer will then have you sign the contract, and the lawyer for the purchaser will have the purchaser sign a counterpart. Both parties are still free to walk away.
The lawyers will then upon the explicit instructions of both the vendor and purchaser affect an exchange of contracts. In practical terms they swap signed counterparts of the contract and the purchaser hands over a cheque for the deposit.
It is at the point of exchange of contracts that the vendor is legally bound to proceed with the sale of the property to the purchaser.
The purchaser however will only be legally bound at this point to proceed with the purchase of the property if an “unconditional” exchange of contracts has taken place. This is the case if they provided upon exchange what is known as a section 66W certificate (under the Conveyancing Act) whereby they waived their right to a cooling-off period.
If there has been no such waiver given in respect of the cooling-off period the purchaser normally has a period of five (5) business days following the date of exchange of contracts in which to pull out of the purchase and only forfeit a 0.25% holding deposit.
Should the purchaser fail to serve a notice of rescission before the expiration of the cooling-off period at that point they are obliged to pay the balance of the deposit and are legally bound to proceed with the purchase.